The Big Tech layoffs are a turning point

Google, Amazon, etc. will still be big, but they won't be an automatic career exit.

Photo by Mark Boss on Unsplash

The end of the Second Tech Boom has played out in stages. First there was the big crash in tech stocks in the first half of 2022. Lower stock valuations caused VCs to pull back on startup funding. They also caused tech workers — much of whose pay comes in the form of shares — to take a big retroactive pay cut. Then later in the year, crypto imploded, which seemed to confirm that this was a general tech bust instead of a speed bump.

Now the latest shoe has dropped. Three big tech companies have now engaged in a massive wave of layoffs — 12,000 at Google, 10,000 at Microsoft, and a whopping 18,000 at Amazon. The first two of these are especially dismaying, because Google and Microsoft’s stock prices had managed to avoid the worst of the carnage in 2022 — previous big layoffs had come at companies like Meta and Salesforce, whose valuations had taken larger hits. If even the relatively healthy companies are being forced to make deep workforce cuts, it bodes ill for the entire sector. (The one big tech company that has avoided major layoffs so far is Apple, whose platform dominance and brand value have apparently allowed it to sail above the fray.)

This second wave of layoffs — which may not be over yet — is already bigger than the waves last fall and last summer:

Source: Layoffs.fyi

Most of these job losses have been concentrated in San Francisco and Seattle.

I’m not sure that these layoffs tell us much more about the future of the tech industry than we already knew. But they probably do tell us something about the future of the tech job market. Over the past decade, compensation at the big tech companies — often called FAANG, even though that acronym doesn’t really apply anymore — soared to pretty incredible heights. And because these companies employed massive numbers of people and seemed to be always hiring, those high-paying jobs there weren’t nearly as hard to land as in, say, the quant finance industry. They also probably seemed pretty secure — when a company just grows and grows, you don’t see a lot of layoffs happening around you, so you don’t spend a lot of time thinking about the danger to your own job.

In other words, for a whole generation of elite knowledge workers, FAANG provided the ultimate career exit strategy. If your startup failed or you didn’t like academia or you were just looking for a second act in life and were decently good with numbers, Big Tech was there waiting for you with an offer that would land you a nice house in a fancy coastal city, a bunch of brilliant and friendly co-workers, and a comfortable retirement.

I don’t want to be too apocalyptic and say “This is all gone now, no more FAANG gravy train”, because that’s just not true. The layoffs are a small percent of these companies’ workforces, and that will still be true even if there are one or two more rounds. Apple, Microsoft, Google and Amazon still sit at the top of the list of America’s most valuable companies, and there are lots of medium-big tech companies too, and those are still going to try to pay competitive salaries. Big Tech is very, very far from dead.

At the same time, though, I do think some important things have changed now, in ways that will hurt some workers, but which ultimately could benefit the tech ecosystem at large. To understand why, we first need to think about why the FAANG companies played such an important role in the first place.

The Second Tech Boom was a Big Tech boom